Six-month Kibor falls to 31-month low as T-bills’ yields drop

KARACHI: The six-month Karachi Interbank Offered Rate (Kibor) dropped to a 31-month low on Thursday as a decline in treasury bill yields raised hopes that falling inflation would allow the central bank to cut interest rates further at its upcoming policy meeting due on December 16.

The six-month KIBOR, a benchmark rate for lending to consumers and businesses, decreased by 49 basis points (bps) to 12.88 per cent, data from the State Bank of Pakistan (SBP) showed.

On Wednesday, Kibor stood at 13.37 percent. The data revealed that Kibor rates for all tenors decreased.The one-week Kibor dropped a little from 15.45 per cent on Wednesday to 15.4 per cent. Additionally, the two-week lending rate dropped from 15.4 per cent to 15.35 per cent, while the one-month and three-month Kibor dropped from 15.13 to 13.52 per cent to 15.03 and 13.05 per cent, respectively.

The nine-month and one-year Kibor decreased by 12.83 per cent and 12.59 per cent from 13.46 per cent and 13.31 per cent, respectively.“On the economic front, positive signals emerged with the finance ministry forecasting lower inflation rates and a robust response in the latest Treasury bill auction,” said Chase Securities in a note.

Wednesday’s auction saw participation of Rs2.4 trillion, with the government raising Rs616 billion against a target of Rs800 billion, despite maturities of Rs918 billion.“Yields also declined by 61 to 85bps, further fuelling expectations of a policy rate cut in the range of 100 to 200bps in the upcoming monetary policy,” it added.

The government, in a monthly economic update and outlook, expects inflation to remain within the range of 5.8-6.8 per cent in November, further receding to 5.6-6.5 per cent by December.

Headline inflation stood at 7.2 in October, compared with 6.9 per cent in the previous month.This month, the SBP lowered its key interest rate by 250bps to 15 per cent, marking the fourth straight cut since June.